Refael Bigio remembers the moment in 1962 that the regime of Egyptian President Gamal Abdel Nasser seized his family's property. Police had cordoned off the Bigio bottling plant at 14 Aswan Street in the Cairo suburb of Heliopolis. A policeman barked at Bigio and his father: "Hand over the keys!"

The nightmare of dispossession that was destined to afflict some 870,000 Jews across the Arab world - forced out or expelled with just the shirts on their backs - had caught up with the Bigio family. Ever since, the Bigios have been engaged in a long-running battle for restitution. Believing they could not get justice in an Egyptian court, their fight has pitted them against the mighty Coca-Cola corporation in the U.S. courts. This week, the family is girding its loins for the next legal round.

Not only have few Jewish refugees ever received compensation, but their plight has never been internationally recognized. Yet, between 1948 and 1972, more Jews in the region became refugees than Palestinians (who numbered 711,000 ), and they lost some 50 percent more in assets, according to economist Sidney Zabludoff. Some 200,000 sought sanctuary in the West, but the majority found refuge in Israel.

The Bigios must have felt alone in a David-versus-Goliath fight for justice - until just before Passover. That's when Deputy Foreign Minister Daniel Ayalon announced a sea change in Israeli foreign policy. Henceforth, the Jewish refugee issue would be raised in every peace-based negotiation with Arab states and Palestinians. Israeli embassies will lobby parliaments to adopt resolutions recognizing the refugee status of Jews from Arab countries. Israel is proposing that both sets of refugees be compensated, based on the value of their assets at the time they became refugees, from an international fund.

Many will wonder - with Israeli-Palestinian peace talks going nowhere fast - why throw another spanner in the works? When he was justice minister in 2000, Yossi Beilin of the Meretz party dismissed the subject of Jewish refugees as a distraction from the land-for-peace Oslo agenda, and closed down the unit that collected data on Jewish property in Arab countries. In any case, he reasoned, refugees were a final-status issue, to be resolved far into the future.

Why, after years of neglect, has Israel now decided to dust off the cobwebs?

No doubt successive governments saw Jews from the Muslim world as Zionist immigrants, not refugees. Singling out Jews from Arab countries would have obstructed their successful assimilation out of the transit camps into the great Israeli melting pot. A public fuss might also have impeded quiet efforts to get hostage remnants out of Arab countries (the rescue of Syrian Jews was still going on until the 1990s ).

The primary reason why the Foreign Ministry has balked at raising the topic of Jewish refugees, however, is that the government feared bringing the Palestinian refugee issue to the fore. But even as Israel has remained silent, the Arab side has never ceased raising the Palestinian refugee issue.

Some believe the Palestinians cannot be held responsible for what happened to the Jewish refugees. But Ayalon argues that the Arab League states, which instigated the 1948 war against Israel, were responsible for creating both sets of refugees.

But when all's said and done, if Israel were to concede an independent Palestinian state, and if agreement were reached on borders, settlements and even Jerusalem, peace negotiations would still founder on the immovable rock of the Palestinian "right of return." Palestinian Authority President Mahmoud Abbas reaffirmed the "right of return" in a Jordanian newspaper interview in September 2011. Even Fatah "moderates" will not give up their "right" to Arabize Israel by flooding it with the four million descendants of Palestinians, who, under the aegis of the UN Works and Relief Agency, are uniquely permitted to pass on their refugee status from generation to generation.

This is how Ayalon's Jewish refugees initiative will promote peace - by making both sides recognize that a permanent exchange of roughly equal numbers of refugees took place.

One might argue that no linkage is possible - one refugee problem has been resolved, the other has not. But the non-resettlement of Palestinian refugees is an abuse of human rights. Palestinians need to follow the model of successful Jewish refugee resettlement by being allowed to acquire full citizenship in a Palestinian state or in their host Arab countries, instead of being fed the vain hope of a "right of return" to Israel, a country that most "refugees" have never seen. The international fund would also be used to finance the rehabilitation of refugees in host countries.

True, the situation is not symmetrical. Jewish refugees do not wish to return to a hostile and unsafe environment in Arab states. But alone of all refugees, Palestinians in the Arab world have been denied the humanitarian solution they deserve. Jordan has been turning away Palestinian refugees fleeing the current turmoil in Syria - in only the latest example of a cruel and cynical policy.

The issue of Jewish refugee rights is not a spanner in the works. It remains a key, unresolved human rights issue. Since February 2010, governments of all political stripes have been bound by a Knesset law committing them to secure compensation for Jewish refugees in any peace deal. The 52 percent of Israel's Jews who descend from refugees forced out by Arab and Muslim persecution will not back a peace deal that ignores their painful history. And there's another reason why Ayalon's initiative is encouraging: An appreciation of Jewish suffering is demonstrably more, not less, likely to achieve reconciliation, when Palestinians realize they are not the only wronged party.

Lyn Julius cofounded Harif, a U.K. association of Jews from the Middle East and North Africa.

Haaretz.com, the online edition of Haaretz Newspaper in Israel, and analysis from Israel and the Middle East. Haaretz.com provides extensive and in-depth coverage of Israel, the Jewish World and the Middle East, including defense, diplomacy, the Arab-Israeli conflict, the peace process, Israeli politics, Jerusalem affairs, international relations, Iran, Iraq, Syria, Lebanon, the Palestinian Authority, the West Bank and the Gaza Strip, the Israeli business world and Jewish life in Israel and the Diaspora.